An institutional foundation will be established to resolve the so-called "gold-chi premium," the gap between domestic and overseas gold prices. Korea Exchange (KRX) revised its listing-related rules to tackle the supply-demand imbalance in which the domestic supply chain cannot keep up with the explosive demand for gold investment.
Korea Exchange (KRX) on the 16th revised its operating rules and detailed enforcement regulations to allow foreign corporations to supply physical gold directly to the KRX Gold Market.
Under the revised detailed rules, the clause stipulating the qualifications of proprietary trading members in the "KRX Gold Market Operating Rules, Article 13 (Member Qualifications)" now includes "foreign corporations that produce good delivery gold recognized by the London Bullion Market Association (LBMA)." This step expands a supply chain long monopolized by domestic firms to global refineries.
A proprietary trading member refers to a physical gold supplier; a business seeking to supply gold to the KRX Gold Market must meet certain qualifications and join as a proprietary trading member.
Until now, the KRX Gold Market had maintained a closed structure centered on domestic suppliers such as financial investment firms and banks. Although there was no explicit prohibition, the lack of a legal basis meant there had been no cases of entry by foreign corporations. With this revision, foreign corporations can obtain importer status, opening the way for LBMA-certified foreign firms to supply physical gold directly starting on the 18th of next month.
Korea Exchange (KRX) also significantly lowered entry barriers for foreign corporations certified by the LBMA. It decided to exempt them from domestic verification procedures such as the existing proprietary trading member requirement of at least 100 million won in sales in the most recent fiscal year or social credit.
A Korea Exchange (KRX) official said, "For good delivery gold producers, if they have LBMA certification, which is the global standard, some qualification requirements have also been waived," and added, "In the case of gold producers, obtaining LBMA certification itself means that the duration of gold production business and production volume thresholds are higher than in Korea, so for importers as well, if they have LBMA certification, we revised the rules to waive some requirements."
With this institutional improvement, if large foreign refineries release gold directly, the premium that forced buyers to pay above international prices is expected to be removed quickly. As step-by-step distribution margins dependent on domestic importers shrink and a direct overseas supply system is established, the nearly 20% gap between domestic and overseas gold prices last year is expected to converge to a global standard level.
Lee Hyo-seop, a research fellow at the Korea Capital Market Institute, said, "If there is a shortage of stable suppliers of gold, it is difficult for a market to form, volatility increases, and market participants can be broadly harmed, such as being unable to sell when they want to," and noted, "It is a meaningful institutional change in that it secures a stable source of supply."
At the same time, the researcher evaluated, "Until now, when the gold-chi premium was added or when prices fell, there could be sharper drops," and said, "If domestic prices are higher than global quotes, suppliers in the London gold market can increase supply to the domestic market, so the divergence and fickleness of the domestic gold market could be alleviated."